Untitled Texas Attorney General Opinion

OFFICE OF THE ATTORNEY GENERAL OF TEXAS
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.(2 ,p ..,’ ; AUSTIN~, . i

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recent'date request-'
ilag SOUP opini tionC The factual
the following para-

orations )las con-
s physical proper-
f.n the.supply business~
an tPatlllaotI.ng
a.slmilar
dsslres to cease ~thhe
t ijartictllarpext oi its
ed.onwzth suck equip&mlt
propertFekc' .As a part oP,the
olrdmto seowe the puzwhaser
in the acquisition of Uics good tiilX.,eta.,
It agrsee not to transact business df the
character sold Pop a stipulated period vith-
in a specified territory. 5:desire to sub-',
mlt to yonibr your advice the qtiestion of
whether or not such contract Win violation
of the Anti-trust Laws of the State of Texas."
 Xo&able

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23
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reads t.

the : :i
tranrpcmatlon, sale oppur-
chase of m%mh%nd1se, produoe or~~commodities, or
the busines~,ot;ips~ae,.:or~to~prevent or~lessen
mpet1t1o&~~im~aids~to~ eomm8roe. or.iu tha poepara-.
Eon of auy:py3duetPoa~nmrket:o~ transportation.
"4.~'~g?$&: ~.*.'.
;:,: .:
oa'ieaintati.any.,stanclard dr. figure
, whereby the:.~px$es~.of any,artioXeor commdltp of
merchandise~~.paaducdor acumsspoe~ or the- cost of
trausportatl&a;:or insurance, ok? the'preparatiou
of auy proditatior market'or trauspoDtstiou.shall
be In arqmannsr aPP8&ed~,~contDolled or-estab-
.lish6d, ;, ;<:.: .,,..
: ..,
.enter lnto,'~2aaintain,'exeaate
ry out sng contract obligation or aazwement
by which the'Darties thereto-bind, or have bound,
themselves not to sell,~dispose. of, transport. or
to prepam for market or transportation say article
or commodlt~,~-or to make say oontvact of l.lxi~e.u~e
,at a price belov a common standard or figure, or
by which they shall agree, in any mmner, to keep
the price ob'suoh artlcle~or commodity, or charge
'for transportation or Insnr%nce, or the cost of
 ’ 729

Honorable !&Win H. B?OWn,.Jr., PSg8 3

the preparation of any product Por market or trana-
portqtion, at a fixed~.or graded Pigure, or by whioh
they shall, in any manner, affect or maintain the
price of any conmmdity or article, or the cost of
transportation or lnauranoe, or the cost of the
preparation of any product for market or transnor-
*ation, between thei or themselves and oth&, to
prealude a free and~unrestrioted competition amoq
themselves or others In the aale of transportation
of any such article or commodity or business of
transportation-or Insurance, or the preparation ~?
of an product for market.05 transpo5tation, or
by w El ch the~.shalL:iagree to pool,. oombine.or unite
any interest they may have.in conueation with the
sale.or purahase ot‘ any artSoLe or commodity, or
charge Par transportation~~dr.insur6nc8, or charge
for tha prepa+ation.oP an+ produ&for market or
transportatlon,Ivhereby its price or such charge
might be in any manner~~affected~

,:: “6., To regulate’, fix & knit the output of
.-._
any article or commodity which may be manufactured,
mined. produced or sold, or the amount of Insurance
which may be undertaken or the amount of work that
may be done in the preparation of any produet for
market or~tranapo~tation;~. . .

“7: l%abbt&r:P$om~&agi& & or continu-
ing'bustiess. or from the purchase or sale OP mer-
chandise; produce or commodities partially or en-
I
tlrely~wlthin this State; or any portion thereof;lt
‘(Undersooring Ours}

We ha~e't&derli&d'th~s~ sections of Article j426,
which appear to be in anywa applicable to the stated Pacts;
From our study~of your ues ion, it appeara~ that the, decisions
in clvil~su~~s are conef usive
z that Artiale 7426, supra, does
not apply to the.sale of%he business and the good will thereof,
accompanied.by an obligation on.the part of a seller not to resume
. business for a llmited~tlme at a specified place, where the pur-
chaser is a single person, firm,.corporation or assooistion; fhe
lead- case by the Texas Suureme Oourt on this westion is~ the
case o? Gates ;. Hooper, 90 %exi 563; 39 3; W. 1679, and it is
treated as the~leading case by many courts, and iext wrLters for
the principle that ~therellE;;;kElno Hcomblnatlon.wun~ess two or
more unite or aseociate , skill, or acts for one of the
 pr?Ub%ted purpoeee, and that:a'reetriotion imposed br a~ewle:'l
vendee ie tombeL-treated ae.ilaw~:~and therefore epfokeeble by
thF’.equitable:arm of the law,:,deepite the anti-trust, eta.tutee..
I * ::
:,
.
;”
I.? Juetias-Demeau,.,~~iti& i& the ‘Snpr& Court Ln Q&tee

;i;XMbe a 'oombin+on.oi.6apital; aklll or aots!by-'
.,';;.tro or mo~i;~~,ij-:.',Conb~tl~~~~'ae here used,.
.~~~~meanetllrlonier~aeeooiatl~,~~~~II there be no.
<::~.unSon oraaseaiation. bx vo.%r more .,oftheia,.
$,:.'capital;;;ekill'0~ aate;~~:there can bs~~no~~~oom-
;!J
!,'bLnatlon&asid‘henae
:: n~-%uet,~.. Uhen we..;
aon-
.$:.:.eider ths,puqmee foa which:;tti~~~comblnetion’
; ” ~muet be formd, to coma-:riChlP.the statute,
‘T;.‘.
the eeeentlal meaning of. the word- *~~ombination,l
I,/‘, and the faot, Ahat, a p~+ment le.prescribed,
~. for eaoh .day4hat ~thet.truetdontfnuee~ in. exiet-
,-& ‘itmce, we- am .led to the aonoluelon that .the
: anion oPL; aeeoaiatlon of. *capital;’ &ill .or acts’
,I~2 denounaed.$e.where the,partiee.~fn the particular
<..,?.9case designed.,the ‘imLte$ ao;operation oil euch
.i.agencri.ee,,.whlch might:,bsvs'been~~.othemriee. ind+..'
,.
’,’ pendent ..an&competing;~~!to&the. acc&ql$%;
~..~
of one or more of enah~. purposes.
stated in -the.petition there- is no romblna-
,tion. ’ The plaintiff bought .defeudent’e goode,
tog&hey with ~the ‘good will. of his business,
, ’both of whi& yere sub jeote ,~ of purchase.-and
sale; and,,.I.n,order, ta render the’ sale. oi .the
good will eitectual, the seller agreed~ that
he would not,. for one year thereafter, do a
like buetieee ,In that town.. This was but a
kind of covenant or varrauty that the pur-
chaser should heve the uee and benefit, of
such good vi11 during that year; for It is
clear that,:,,.fthe seller- had immediately
i ’ engaged in e like bueineee at the eeme place,
.
the purohaeer would have had no benefit there-
from. Bythis transection neither the caplte.l.,
skill. nor acts of the parties were brought
into any kind of tiio~,+a$SOciatiOn~, or Co-
operative a&Ion.. .
 .
Ronorable Mervin B. Brown, Jr., Page 5

Reference to Shepp&d'e Southveetern Reporter Cita-
tions Shows the Oat88 v. Rooper case to have been listed as eu-
thority in no lees than forty-four 01~11 caaee to and including
the pronouncement in Houston Credit Sales Co. V. English, Tex,
NV. APP., 139 3.W. (26) 163.. ITo erfort on the part of eny
court to overrule Oaten v. Hooper has been Sound, though we
have made exhaustive esarch,.

In the case &Comer v.'Burton-Lingo Co .; 24 Tex. Civ.
~pp. 251, 58 3, Ii, 969, the court writing upon a related quee-
tion, bed the following to.eayi'
..
"!Phe anti-trust lak.does not apply to
the sale of a buaiueee end the good will there-
of, accompenied by en obligation on the pext
:of the seller not to reeume buel.neee for a
limited time at a specified place; where the
purchaeer Is a eingle~ pereon.or firm. Qatee
v. Rooper [Tex. Sup.). 39 3. W, 1079; Ervln v.
Hayden (Tex. Clv. App~.) 43 3. W.~,&l. * * *.*
::
For add*tlon& authorities see Lengever~v. United Ad-
vertising Corporation,,258 3, W, 856~ Malakoff OILI Co., v. Rid-
dlpberger, 133 S..W. 519;~Ibld, Sup. Ct., 192 3. W. 530; Linen
Service Corporation v, Hyere, 128 3. W, (26) 850; State v. Racfnh
Sattley Co., 134 3. W. 400, end meny others grouped ln 28 Texas
Digest 220-222.. ',

Article.7427, Revised Civil Statutes of Fexae, 1925,
provides in pert?
.~ .,
a-
. "A mokopolp is a. oomblnekon or coneolida-
tion of two or more corporations when effected.
ineither of the Sollowingslethode:
“lb + Yi,

"2. Where any corporation-acquires the
i ' eheree or certificates of stook or bonda, fran-
.s chine or other rights, or the.phyeical properties
or any part thereof, of any other corporation or
corporations, Par the purpose of preventing or
leeeenlng, or where the effect of such acqulei-
tion tends to affect or lessen competition, wheth-
er such acquisition is accompl.iehed directly or
 ,fithcugh our app&ate'~couAe have never passed upon,'.,
e contract eimlla~to the one referred to inyour letter, it ie
OUT oplu~on'that-~lt.wae uotthe~~intention 0s the Legislature,
in enacting krti.ols 7427,.~eupra;.to make it apply to such a
contract * To..riolats eald~~Articls 7427,~there must be a corn.
bination or -coMo~idation~OS~~~o,~o~ uore OorpONtlom. UG ':;
the facts as eubmltted by~you,~tbercle no evidence of either.: (;
B comblnatlon~,o~a ooneolldatfou~!~ This: contract la nothing ..
more tbau a oouteaot:of eale~:oStthe eqpipmantr~and phyelcal propi..
erties ueed'i&the traueeotlou OS a particulaupart or phase ,of:,:.Z
thensupply bueineeei~ Anci~a~'tO the e&e -Or:thee equipment. C.',.
and phyelcal'~pemtlee,.~the seller,;in order to secure the ~II+-'(~
chaser in tha.acquleltiou~ of Its good wlll~~agreee~ not to engage..:::;
.$n that paxWaular~phaee oSthe< eupply bualueeefor a stipulated -1

_ ~~~‘6~~Rnling.Ca~~:~Bw~‘-~.~‘7~,.. It195, ve quote as .\-
fol~owsr _ .$+..,A, .:
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'"Fr&he teete.&d down for deteminlug
'the val3ditxoS such an..agmement;it seem to i
9 follow thatno conventl&aX restraint-of trade
-can be-'exxfopaed,
unleee.~thecovenant embodying
,it is mere~~~.+notllary.
to"the main purpoea~of .i,
; ':
.a lawr~4ont~act.. and neoeeeary tompmteat
then covenautee in the.emjoyment of ths,lcgitl~: :. J
~mate fruite..of the contracti.orto protect him
.from the~daugare of au uujuet~uee of those .~.
,- rNrt8 bythe other.party.~: This etst*ent 0s :
~:the rule Implies that the-aontraot muet~be. one‘
in which there ie~~a'malup&poee, to whfch the '
covenant lu reetraiut of trade is merely ancl-
llary. +:,+'*,e

The restrictive agreement contained.in the lustant cou-
tract, being merely euclllary to the main purpose of the contract,
to-wit: the eaXe'of the equipment aud ptislcal properties used
in,aouuection wlththe .tre.ueactl.onof a particular part or phase
of the supply bueiueee, and necessary to protect the purchaser in
the enjoyment of-the leglt3mate Srults of the contract, is not,
in our opiuion,,a violation of said Article 3'427,,supra.
 Honorable Rarvln.H. Brown, Jr., Page.7

statutes of this..State. Although the general language employed
in the Revised Civil Statutes IS the same a% that used in the
Penal Code, and Brticle.'i426, aupra, is in exactly the same
language as Article 1632: of the Penal Code, and Article 7427,
supra, is in exaotly the same language as Article I.633 of the
Penal Code, they.vere enacted by the Legislature aa separate
bills, and the enaotment appearing In the Clvll Code became a
part. of the statutory law of this State at a subsequent t%meb
See State v. Standard Oil Co., 130 Tes. 313, 107 s. w. (261,; ,,
550;'reirersbig oiv, APO., 82 S.W. (2d) 402;

Itwill be recalled.that the provisions of the Penal
Code recently withstood a moat aggressive attack leveled at the
constitutionality thereof. In an able and elaborate opinion by
the late Judge chriacian or the Comalssion of the Court of Crlm-
inal Appeals this law was upheld. See, Exparte TPigner [Cr. App.)
132 a, w. (26) 885;. ,A motion for rehearing WaB Piled, but was
overruled; whereupon, the case vas appealed to the Supreme Court
or the United Stated and finally affirmed.. TQner v. State or
Texas, 60 SUP. Ct., 879, 84 L. m-756.. Mr. Justice Frankfurter
delivered the opinion of the Supreme Court and speoifically over-
ruled the case oS~Conuolly v. Unios Sewer Pipe Co.. 184 U, 3.
540, 46 L. Ed. 659, 22 Sup. Cti 431, long relied upon RS maklng
the penal provi3ions of our anti-trust laws bIOp4ratiVe.

As to whether the Court of C~lmlnal Appeals would Pol-
low the Civfl Courter on a state. of faots sirpilar to those Fn-
valved Ln the Gates v. Hooper case, aupra, it is not the pxe-
rogatlve of this department to anticipate or forecast such con;
t1ng4ncy:. l!hla is a field reserved exalus~vely for the Court
,
of Criminal Appeals; however, lu this conneatlon, we point out
the fact that while neither the Supreme Court an* the various
courts of Civil Appeals on the one hand, nor the Court of Crim-
inal Appeale on the other is in any manner subordinate one to
th8 other, it appears that respect will always, be given to the
decision of the Court which gives the first interpretation to
language of a statute of such nature that it might be properly
construed by either Court. See 11 Tex.,Jur. 853: Redman v.
State, 67 Tex, Cr. R. 374, 149 9. W. 676; Rx parte Mussett, 72
i ’
N Tex, Cr. R. 487, 162 3.,Wi 646; Loaeing v. Hughes, Tex. Civ.
App. 244 3. W. 556, 561.

We therefore respectfully advise you that it is our
opinioa that the contract as outllned in your opinion request
is not a vfolatlon.or the provisions or the anti-trust laws of
 ,i. . G..

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